How does the Q5 add to the BlackBerry story?

Last week during BlackBerry Live, only a few major announcements were made. We’ve already discussed the cross-platform BBM launch platforms in detail but we haven’t really talked in depth about what the other announcement means to the company. Yes folks ... I’m talking about the BlackBerry Q5.

When Thorsten Heins unveiled the slick lower cost QWERTY device on stage, pretty much everyone noticed two things. First, it’s not expected to come to the US market. Instead its more of a play on emerging markets. Second, no pricing information was disclosed at all. So we’re left to guess.

Let’s touch on those points a bit more closely. BlackBerry doesn’t actually refer to “emerging markets” with this device. Their wording is “Selected markets in Europe, the Middle East, Africa, Asia and Latin America.” In other words, it’s going to almost all areas of the world except the USA and Canada (where the Q10 is going to play a very important role).

We’ve already seen some good evidence of aggressive pricing at around £20 a month for UK customers who buy the phone on a contract. We don’t know what the sticker price for the phone will be on such a monthly tariff, but I’m betting the phone is free or next-to-free.

But that’s the UK. People still take contracts there. Not as many as in the US and Canada, mind you, and none of these are considered emerging markets. When we speak of emerging markets we usually mean places like the Philippines, Indonesia, Malaysia, Vietnam, Nigeria, Kenya, much of Venezuela, Colombia, and other countries across the world with relatively low GDP figures.

The Q5 essentially fills in the BB10 portfolio where the Curve brand filled in the BBOS portfolio

I’m pretty sure Kevin has said this already, and I’ll repeat it because I think it’s true. The Q5 essentially fills in the BB10 portfolio where the Curve brand filled in the BBOS portfolio. During its time, the Curve sold remarkably well and was priced competitively with other smartphones. So now with the Q5 coming out, I think BlackBerry needs to accomplish that exact same price positioning.

Over at BGR (be kind in the comments, please), Tero Kuittinen writes about how the average selling price of BlackBerry phones was above $300 in the summer of 2011. He goes on to say,

”This simply must change right now. The prices of relatively fancy Android models like Samsung Galaxy S Advance have drifted to the $250-270 range in emerging markets. We are talking 4-inch Super AMOLED touchscreens and 5-megapixel cameras at this level."

He then goes on to point out that there is a very competitive layer of cheap Android hardware at about $100 (which he rightfully points out is killing Nokia’s business). His conclusion is that we need to see a $200-250 price point on the BlackBerry Q5, or else it’s not going to sell well in emerging markets.

I think this is a decent analysis, but there are a few bits that I disagree with. So let’s go through it, because I think a $300 price point can still work on this phone.

I wouldn’t have necessarily chosen to compare the Q5 against an all-touch Android phone, but since the argument was made in the context of what pricing the Q5 needs to hit, let’s flesh it out. I know this isn’t a spec game, but specs do affect performance so here is a look at the Galaxy Advance S versus the Q5:

Internal memory of 768 MB compared to 2 GB on the BlackBerry Q5. We all know this affects OS responsiveness as well as the number of apps you can keep open at any given time.

The processor is a dual core 1 GHz versus 1.2 GHz on the BlackBerry Q5. Combine the power of BlackBerry 10 with a beefy Snapdragon processor and the Q5 is going to be a much snappier phone.

Screen resolution on the Samsung is a pathetic 800 x 480 compared to 720 x 720 on the Q5. The BlackBerry, with a smaller 3.1” screen has 35% more pixels and 41% better pixel density. Anyone looking at these two phones will be able to see the difference as clear as day.

No LTE

Huge difference in battery since the Samsung comes with 1500 mAh versus 2100 mAh for the Q5, just like the BlackBerry Q10. Which phone do you think will have a better chance of getting you through an action-packed day? Keep moving :)

Bottom line - If the market pricing for the Samsung Galaxy Advance is $250-270, then on specs alone I think the Q5 justifies a higher price. But it’s not just about specs, as I’ve said. I think everyone knows this. The Q5 is a physical keyboard phone built for people who want to do a lot of typing ... for people who are messaging centric. BlackBerry is rebuilding its entire brand around the concept of getting things done, whether this be purely social or business.

Now let’s quickly discuss the idea of $100 cheap Android phones. Obviously the Samsung competitor above is not a $100 phone and it’s obvious that specs still significantly fall short relative to the Q5. So I’m not even going to bother doing any kind of comparison. I’ll just say that if Samsung can sell its phone for the mid to high $200 level in a market that is already flooded with ultra low end phones built on MediaTek reference designs, this demonstrates very clearly that there is a market for more than the absolute bottom of the barrel in emerging markets. Samsung has built up a solid brand and can price its products at a premium. Guess what? So has BlackBerry. The BlackBerry brand is not nearly as tarnished overseas as it is in North America (and they’re making a nice comeback here too).

I think the right price point for the Q5 is somewhere around $300

My conclusion: I think the right price point for the Q5 is somewhere around $300. I think BlackBerry needs to re-establish itself as a high end brand in each of its markets. In the emerging markets that means something above $250, and in the US market that means not even selling the Q5. Then, in another year or so, I think it makes sense to introduce even lower priced handsets (organically, or through BlackBerry 10 licensees.)

Financially speaking, it’s obvious that the Q5 will have less contribution margin compared to the Q10. But I expect the phone will still be profitable for BlackBerry, and perhaps drives even more volume than the “tens of millions” the Q10 is expected to sell (as per Thorsten Heins’ comments to the media). With the launch of the Q5 I’m more bullish on this company, not more bearish.

Unfortunately we don’t know what pricing will be. But the wait won’t be long. It’s coming to market in July, and pricing always leaks ahead of launch.

How does the Q5 add to the BlackBerry story?

I really hope they end up launching this in NA. Too many of my friends had curves instead of bold back in the day because they're cheap. I think they need to offer a low end and premium line. Android basically owns the low end market otherwise.

According to me to a business man with a budget the Q5 is clearly the better option! The mail services are the best in the market on a bb! If u have various folders for mails! You would have to individually open the folder and check if u have received a mail in an ios or android device whereas in a BlackBerry the mail is showed in the inbox but is also sent to the individual folder! So blackberry clearly getting work done!

The bottom line is that whatever price they set for the Q5 is has to be priced right, at the beginning. Saying they can always lower the price if it doesn't sell is not a smart thing to do. Why ? because can you imagine what would happen to BBRY stock if they launch the Q5 and it doesn't sell! Then they have to lower the price and all the BB bashers will say the phone is a flop and they had to lower the price because nobody is buying the phone. Sound familiar!

$300 for the Q5 is WAY too much. Chris is clueless about the latest wave of cheap Mediatek devices, built on the new Quad core MTK6589 platform. You can pick up a Lenovo A820 with a bigger screen (4.5 inches) better resolution (960 *540), faster CPU (Quad core CPU), faster GPU (SGX 544), removable battery, better camera. All that for $150. With those specs you can run all the Android apps out there, unlike the Q5 that adds to the Q10's fragmentation issues by having worse specs.
A price of $250 will be just about right. Much more than that and it'll be tough going selling as many units as they'd like.

With all due respect to the author, I have to disagree with suggested price.

$300 for Q5 could be in my opinion way too much, particularly if it turns out that Q5 is really destined to emerging markets.

According to figures released by IDC BlackBerry market share (smartphone operating systems) was only 2.9% in 1Q13. So there is really HUGE room to grow for BBRY.

- Q5 price must not be set up higher than competing devices prices. Competing devices are not just corresponding Android/Samsung devices but also brand new Nokias with their very aggressive pricing strategy.

- Economy of scale. Moreover lower price of Q5 could be translated into higher sales. If the margin per device would be let’s say $60 instead of planned $100, two better priced Q5 devices sold would bring BBRY $120 instead of $100 from one originally priced unit sold.

- Potentially lower income from competitive priced Q5 devices could be compensated (or increased) by new sources of revenue. More BB10 devices sold = more profit from BBRY appstore etc.

- Trade in programs. If BBRY is serious about gaining the market from its competitors it should definitely offer trade in programs – give us your old Samsung/ Iphone/ Nokia and we give you brand new BlackBerry with concession.

BlackBerry needs to bring out a lower spec'd device that will go head on with the iPhone 4. Many carriers in Canada are selling the iPhone 4 for $0 and BlackBerry needs to get into that market. I don't want to hear excuses about BlackBerry attaining this higher quality image. It comes down to people that have a low income or are teenagers and most parents are not going to be dropping $99+ on a smartphone for them. BlackBerry needs to get the teenagers when they are young so when they pick their next more expensive phone they look for a BlackBerry. Right now the iPhone is seen as the cool phone by the younger generation and BlackBerry needs to get in there and fight for that crown back. Bring out a lower end version of the Z10 and bring the Q5 as well. Right now is not the time to be picking and choosing what phone is available in what market. There are different users that have different needs and BlackBerry needs to have a phone for each one of them so they can regain lost market share.

Bad move naming it the Q5, it gives the perception that it's half as capable as the Z10 or Q10. They would have been better off calling it the E10 or L10 or something. It seems to undermine the use of the BB10 OS on the device as well.

The Q5 looks really nice for it being a supposed "Developing market " model. If BlackBerry could would push BBM as an alternative to texting among teens in the us/canada/first world markets the mind boggles at the potential market share.....
On a totally unrelated, but positive note- my stormtrooper zed 10 is Canadian made. I'd like to thank the Canadians for a truly first rate,stylish,always there never let's me down well screwed together piece of equipment.
If only my employees were as rock solid reliable as my zed 10....
BlackBerry by choice , BlackBerry for life

Here is Canada. The provincial government is waiting for the free phone on contract (Q5 or equivalent) to roll out to the staff. Only the executives get either the z10 or q10.
The only set available for free to them now is Iphone 4s or BB9900.

Somewhere around $300 in Brasil would be R$600. That's what most used OS7 devices are going for on our local ebay-ish site. Low-mid end Android phones usually sell for R$300-450 ($150-225).

If I were to set the price for the Q5 in Brasil based on that alone, I'd tag it at R$500 off contract (which would probably translate to R$100 on a Control plan and free on a standard contract). That's just R$50 less that what you propose Chris, but trust me, R$100 off is reason enough to get a different phone around here when you're dealing with the low-mid range.

I thought the Z10 and Q10 were the phones that were intended to re-establish BlackBerry as a maker of high end phones? Are these not available in those "emerging " markets? I think this Q5 should be priced as low as possible to build up market share and entice people to buy the higher end phones.

these are mid-tier devices and I think BBRY are wanting to make a decent profit out of their hardware division. Also it gives people reason to consider the higher end devices unlike a device that is going for 'peanuts'.

Also the device is qwerty and is in a small category of specialty phones with hopefully a smart price to accompany it.

It would be a bad move on BBRY to start releasing a low end device right now.

Also with BBM just about to go cross platform, we can find them having a place on cheapr android devices in the future - monetizing them in the process.

Chris, I said it before, I always enjoy your posts BUT please, my country name is Colombia not Columbia, Columbia could be one of the many distritcs, towns and even cities in the US, but never the country. Colombia with an O is the way to go.
;)

My final guess on the price of the Q5 is that it will be sold for $349 sim free, which for us Brits is currently about £229.
I believe it will be sold in the US during Q4 after BBM has been established cross platform on both iOS and Android.
Blackberry seem to have made an excellent judgement call on what are the appropriate minimum specifications for hardware, to run a smooth entry level Blackberry 10 experience.
I see the Q5 going up against the Nokia Lumia 620/720 and even the 820 and holding its own in a Royal Rumble, only asking for the Z10 to jump in so as not to make the match look fixed ( I still believe wrestling is real )
If the the price is right in the Uk, I will be buying 4 for my friends and family so please make me smile Blackberry as my Budget is a grand all in.

Great article Chris. My take on Q5 coming to North America is that BlackBerry is banking on it being popular in their target markets. To keep stress off manufacturing and distribution lines, they will stagger this launch like the others. The higher the demand in those markets the longer it will take to reach North America. This will allow them to meet demand at a safer pace and build a better end product. I think BlackBerry will bring a serious product line up to all markets over time. A better product means less issues to deal with. This company is smarter than some of us give credit.

I doubt we will see the Q5 at all in North America. Here, BlackBerry is taking a different approach. They are taking on the high end first here to rejuvenate the brand. Especially in the USA, people will sacrifice to have that high end gadget as a status symbol. Busted old car, but a $700 phone.

In terms of UK pricing for Q5 around GBP20/mth, I notice that is a similar price to the iphone 4 and the Galaxy S3. Would someone buy the Q5 over either of these phones? Perhaps is they desperately need a keyboard but i think it might be a tough sell otherwise..

Is South Africa still considered an emerging market in BB World? I'm asking this because living in South Africa myself, I consider us an emerging market but then everybody's analysis of our market is so completely WRONG that I just wonder if anyone even knows what they're talking about....

Emerging markets is 90th wording...nobody should use these terms today. It is a term that merged from the former - and even more discriminating - couple 'developed' and 'not' or 'underdeveloped' countries. But these economy guys are mostly less developed or educated hahaha...just kidding.

thanks for the comparison between the Q5 and the cheaper Samsung product, that helps frame where this product will be positioned in these markets. I think sometimes North Americans forget that there is sizeable disposable income in many of these markets (enough to buy a $300 phone), rather than just having to serve the low end of the market. I've visited 18 countries in Africa and most East Asian countries so i have seen it with my own eyes. While the sub $100 android is a threat, many of these markets still have sizeable non-smartphone segments -- most of these people using a cheap Nokia might look to upgrade to a cheap Android but they were not customers for the BB7 products before and likewise won't be customers for the Q5. I think Blackberry has no business trying to compete at the low end of the market at the moment...Nokia is much better, as are the white label chinese vendors.

Even for Z10 and Q10 guys, where are the huge colour options? S4 is getting ready to push out more colour options. I wanted my S3 in nothing but Titanium Gray. I love the Z10 in white and the Oreo aka Storm Trooper Z10 that fans came up with.

Let's see what it's up against when it's released.
BB10 is RAM hungry, while Android is CPU power hungry, but if all people do on their phone is chat and perhaps snap self-shots, they don't need a beast of a phone and might go for the cheaper option.
BlackBerry probably can't release another, cheaper phone, as the experience would be too degraded, but they can lower their margin when they see it doesn't sell as well as they'd hoped.

In my view I almost agree with you on every point, the price range between 250-300$/€ (since I'm in Europe x)) is a very acceptable price, for a device that will have nearly as good specs as the q10 and z10. At this price it can easily win against the other phones at this price. There is no doubt it will do great ! The colors, the design, the big battery, the very good specs will do great in a young market. At 300€ to have a full keyboard, complete bb10 experience with a large battery is more then enough to outmatch every other phone !
Now like I said I agreed with almost everything, the sole argument that I don't agree with is that the Q5 is not for the US market, I think the Q5 would sell very well in the US, as it offers a BB10 experience at a more affordable price, that could attract much young people, who a tired of paying a lot for a Apple device , can't afford nor have parents that are willing to invest in a z10 or q10 and still want to have a great user experience and a full keyboard.
For my part, I bought a Z10 because I couldn't wait to get my hands on the BB10 platform, I knew that the Q10 was more expensive so my choice was made. I must say with the q5 I was really tempted by the red color option, the bigger battery, the relatively lower price. Also it was announced to be released (in France and probably in the same time range in Belgium) in the first half of July which happens to be around my birthday. Would I have know that BlackBerry will release the Q5 earlier I probably would have waited !
Now don't get me wrong I love my Z10 but the battery life is still a bit deceiving. But it is by far the best phone I ever had ! So to conclude I think it will be a great device and a great success around the globe even in the US and Canada.

Yeh 250-300 US sounds about right, it has better specs than the S3 mini which is crap but still cute and fast enough to get a second look. I like the fact it has a nonremoveable batt at this pricing level, younger ppl tend to drop their phone and have it shackle out. They should have launched a Z5 as well. Again where is the marketing for Q5?

I agree, the iPod touch is the only product in its class. BlackBerry could quite easily get into the market, with a wifi-only BlackBerry Z10. It would beat iPod touch in every area, and would finally give Apple some competition.

You forgot a key in your points. The Q5 is a platform with limited apps. For it to succeed, as with any BB, at least to start with the price point is KEY. If app selection was there it would be ok to enter at $300. But if I was presented a $270 phone that ran every app under the sun vs. A $300 phone that ran 10% of the popular apps but just ran them faster I'd pick the $270 phone.

I think you're missing the point being made. Someone who wants to be productive on bb10 will be sporting a z10 or q10. The audience this device is being targeted for is clearly the app hungry trendy teen texter, which this will not appeal to. That's precisely why it's not coming to the US, or at least I hope it doesn't. Between a sea of icrap and droids out there in the US and Canada, there's no compelling reason for someone in that audience to consider this.

That's correct Prince, and SA is one of the only markets in the world where BlackBerry out sells other handset makers...But unfortunately that will (and is already) come to an end with the death of BIS...

I say it shouldn't be the death of BIS, but the start of war with carriers to get better services. We want better data plans, better signals, better connections. They (carriers) can talk about raising the price/ subscriptions after that.

Personally I think that they have to release this in Canada. The most popular BBOS phone up here was clearly the curve series. When BlackBerry was hugely popular, all te teenagers had BlackBerry cures. So it is extremely important that they release this in Canada. Even at $300 here it would sell, probably as well at $350. It would compete against the Nexus 4 very well.
As well this small increase in price compared to the rest of the world will create enough funds to offset the less revenue from those countries. But no matter what they need to be able to make money off the device.
As well remember that even the lowest curve, the curve 9320, was released in the US so it shouldn't be a surprise to see it get launch here. As well Nokia release the Lumia 521 on T-Mobile at $150 no contract, so BlackBerry needs something in the low price rang revenue here in the US.

Personally I think that they have to release this in Canada. The most popular BBOS phone up here was clearly the curve series. When BlackBerry was hugely popular, all te teenagers had BlackBerry cures. So it is extremely important that they release this in Canada. Even at $300 here it would sell, probably as well at $350. It would compete against the Nexus 4 very well.
As well this small increase in price compared to the rest of the world will create enough funds to offset the less revenue from those countries. But no matter what they need to be able to make money off the device.
As well remember that even the lowest curve, the curve 9320, was released in the US so it shouldn't be a surprise to see it get launch here. As well Nokia release the Lumia 521 on T-Mobile at $150 no contract, so BlackBerry needs something in the low price rang revenue here in the US.

Remember that it is a mid range device. But I agree that it should be released in the US and canada ! For the low range I think BlackBerry has to wait before releasing a device on a $150-200 price tag since this could harm the selling of the high end devices (and mid range devices)

I agree, right now, BB10 can't run on hardware that is $150- $200. That will come eventually, but not for 2-3 years. They do need to make more money. But I don't think it would harm too much, because, people who are considering the cheaper phone, usually can't afford the more expensive devices.
But, they do need to bring it here, even here for $350no term, and it would probably sell.

Absolutely, à mid range device wouldn't harm the selling of the high end devices. It would just make the BB10 available to most people, plus it looks awesome and will have a great battery life, that can't be said for thé rest of the phones at this price ! A 300-350$ no term BB10 would sell like HELL ! (especially for teenagers)

Canadians may still be able to get a Q5 according to Andrew MacLeod, BlackBerry Managing Director Canada. “I wouldn’t discount the Q5 not being available in here, we are looking at all markets,” he said.

This quote from McLeod was reported by many news sources during Blackberry Live.

I can't believe you quoted a BGR article! What a train wreck that site is... It would probably be a little more reputable without all the insulting idiots that comment on everything. The comments ruin anything good the article may have said.

I agree. the site is a train whreck... The owner is clearly anti-BB... But not all articles are. They actually have an article where one of the writers goes on and on about how the PlayBook was the best tablet (back then).

And let's face it, the bits Chris quoted make sense. I'm just against the BS articles, hence I don't visit BGR, but this bit is solid enough to get a quote.

Selected markets : I see many teenagers with BB's in my country. A lot of parents don't buy an expensive phone for their children, understandable, as we all know how children are sometimes, a little reckless, things break, get stolen, etc. As this is not an emerging market, i see a market here for the well-priced Q5 with its hip colors for the teenagers.

With such low specs,the hardware costs are next to nothing.Companies like BB want the latest and pay a premium price to get it ,and then we pay big bucks to enjoy it ,I bet the Q5 costs next to nothing to produce and assemble.this is all good for everyone right down the line,keeps people working.they should sell very well and for some reason, they don't ,I wouldn't be worried about unsold inventory ,just the analysis turning it into some big disaster.Discounts will come just as they always do and when BB decides to make the move they have plently of room,price wise.

Not everybody wants a massive phone, I know I don't (although I would acquire a 5 inch BlackBerry device, but that's because it's a BlackBerry device). As for now, these launch models and the Q5 are a superb BlackBerry 10 start. Good show.

By providing a familiar but new product to a familiar but new market. I think it will do well because of that. Plus, it looks great in black(berry). It runs BlackBerry 10, meaning it's a great phone. Can't go wrong with a Q5 as a choice and for those who want a BlackBerry 10 experience on a budget. Great move to make this device. All three new phones are really good. Both physical keyboards are really good, so - great move on BlackBerry's part.

Stock with the 250$ price range. Even though, the Q5 has a much higher spec, the Galaxy is a full touch screen phone. It's a big phone. Only people that loves the keyboard experience will buy the Q5 for the $300 price range.

Eh? Which state would that be? Perhaps you are referring to the District of Columbia which is not a state though it does get a representative in the House as do American Samoa, Guam, Northern Mariana Islands, Puerto Rico and the Virgin Islands. Nevertheless, your point on the spelling of the country is a good one.

Agreed. If they're going to compete it's necessary.
They told me that there's no mid-tier market here, that's why they're not bringing it. One, I dont agree.
Two, even if that was true, that's to BlackBerry's advantage to create it, and return to the days of glory! Actually considering the Curve analysis above, it makes clear that their reasoning is faulty, based on their own experiences.
Sigh. A new BlackBerry is good, but if they're being.. yeah...

Total agreement here. Definitely one of Chris' finest articles to date. I don't always agree with Chris, but this time his analysis is hard to argue and I would bet he turns out to be spot on in July when the Q5 launches.

What I really want to see is a BB10 phone with killer specs.. and hopefully a sharper design than the Z10.. Please take a bit more care of the look of the phone BlackBerry! I don't have a problem with the Z10 and Q10 but I really wanna see a BlackBerry that looks sexy and expensive and I don't think the Z10 really hit that target :(

there could be a full screen lower end device, as DANNOZV8 said, but i believe that we still haven't seen nothing yet, still to come the code named (Aristo) could be the A10 later, but we all know that the killer BlackBerry phone has to be B(10)LD !!!!

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